What Counts as Your Personal Funds
Fannie Mae defines "borrower personal funds" as money you own and can access for your home purchase. This includes obvious sources like checking and savings accounts, but also extends to retirement accounts, investment portfolios, life insurance cash value, and proceeds from selling assets.
The key requirement is ownership and access. You must be able to prove the money belongs to you and that you can get to it when needed. Joint accounts with a non-borrower spouse count as your funds. Accounts held in a living trust also qualify if you're the person who created the trust.
Say you have $50,000 in a joint checking account with your spouse who isn't on the loan. That entire $50,000 counts as your personal funds because you have legal access to it.
Bank Accounts and Basic Assets
Standard depository accounts are the simplest assets to document. Checking accounts, savings accounts, money market accounts, and certificates of deposit all qualify without restrictions.
For most loan programs, you need one month of account statements. If you're using standard documentation instead of streamlined processing, you'll need two months of statements. Your lender can also verify balances directly with your bank through a verification of deposit form.
Money market accounts with $75,000 and a CD maturing next month both work the same way. The lender wants to see consistent balances and understand any large deposits that appear unusual for your account history.
Investment and Retirement Accounts
Stocks, bonds, mutual funds, and retirement accounts like 401(k)s and IRAs all count as personal funds. The catch is proving you can actually access the money when you need it.
If the total value of your investments is less than 120% of what you need for closing, you must provide evidence of liquidation. This means showing you've actually sold the stocks or withdrawn from your retirement account.
Your 401(k) has $80,000 and you need $60,000 for closing. Since $80,000 is less than 120% of $60,000 (which would be $72,000), you must prove you've withdrawn the money or can withdraw it without leaving your job.
For employer retirement plans, you need documentation showing you're allowed to make withdrawals while still employed. Many plans don't allow this, which could disqualify those funds.
Proceeds from Loans and Credit
You can use proceeds from secured loans as personal funds, but with important limitations. The loan cannot come from anyone involved in your real estate transaction, and if the loan is secured by an asset you're also counting as personal funds, you must reduce that asset's value by the loan amount.
Credit cards and unsecured lines of credit have strict limits. You can only use them to pay loan-related fees like origination charges, appraisal costs, or credit report fees. The maximum is 2% of your loan amount or $1,500, whichever is greater.
You're getting a $400,000 loan and want to put the $1,200 appraisal fee on your credit card. This works because $1,200 is less than both $8,000 (2% of $400,000) and the $1,500 limit. But you couldn't put your $15,000 down payment on the card.
Asset Sales and Real Estate Proceeds
Money from selling assets counts as personal funds, but the buyer cannot be connected to your real estate transaction. You need a bill of sale and proof you received the proceeds.
Real estate sales work differently. If you're selling your current home to buy the new one, the settlement statement from your sale serves as documentation. The timing matters - you need the proceeds available by your closing date.
Real estate agents get special treatment. If you're a licensed agent earning commission on your own home purchase, that commission can be credited directly toward your down payment or closing costs at settlement.
Trust Funds and Life Insurance
Trust funds qualify if you're the beneficiary and have access by your closing date. You need documentation from the trustee confirming your beneficial interest and the trust's ability to distribute funds. Undistributed trust funds can only be used for reserves, not down payment or closing costs.
Life insurance cash value works as personal funds, but only the cash value, not the death benefit. You must own the policy (not just be the beneficiary) and provide documentation from the insurance company showing the current cash value and any outstanding loans against the policy.
Documentation Requirements
The documentation you need depends on your loan program and the asset type. Most bank accounts require recent statements covering one or two months. Investment accounts need statements or direct verification from the custodian.
Large deposits in your accounts trigger additional scrutiny. Your lender will want to know the source of any deposit that's unusual for your account pattern. Business accounts get some relief here - if you're self-employed and the deposits are typical for your business, you don't need to document each one.
For assets you're liquidating, timing matters. You generally need to show the money has been converted to cash and deposited in an accessible account before closing.
Special Situations and Restrictions
Some loan types have minimum personal fund requirements. Investment property loans require all funds to come from your personal resources - no gift money allowed. Second home purchases need 5% from your personal funds if you're using gift money for the rest.
International funds face extra requirements. Money from foreign accounts must be transferred to a U.S. financial institution and converted to dollars before closing, or the total foreign assets must be worth at least 120% of what you need.
Cryptocurrency must be converted to U.S. dollars before it can be used. The volatile nature of crypto means lenders won't accept it in its original form.
Common Problems to Avoid
The biggest mistake is assuming all your money automatically qualifies. Restricted stock that hasn't vested doesn't count. Retirement accounts you can't access without quitting your job don't work. Money from family members has different rules entirely.
Timing creates problems too. If you're planning to sell investments to fund your purchase, start the process early. Market volatility could affect your asset values between application and closing.
Don't double-count money. If you put down an earnest money deposit, that amount gets credited at closing - it doesn't add to your available funds. The lender will track this to prevent double-counting.
Business owners face unique challenges. Mixing business and personal funds can complicate documentation. Keep clear records of any business money you plan to use for your home purchase.
References
For the official guidelines, see 5501.3: Borrower personal funds in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Freddie Mac Guideline Text
This section contains requirements related to:
Depository and non-depository accounts
Securities, retirement accounts and government bonds
Proceeds from a secured loan
Revolving credit card (charges/cash advances) or unsecured line of credit
Proceeds from credit card reward points
Proceeds from the sale of real estate and other assets
Cash value of a life insurance policy
Additional requirements for accounts held in financial institutions
Minimum contribution from Borrower personal funds
Business assets
Source of funds from outside the United States and its territories
Cryptocurrency
Asset types that are considered Borrower personal funds and the eligibility and documentation requirements are described in the tables in this section. These requirements apply to all funds used to qualify the Borrower, including reserves. Any limitations on the use of an asset type are specified in the tables below.
Section 4501.7
for additional eligible sources of Borrower personal funds for Home Possible
®
Section 4504.7(c)(i)
for additional eligible sources of Borrower personal funds for HeritageOne
®
Mortgages.
(a)
Depository and non-depository accounts
The following table contains eligibility and documentation requirements for depository and non-depository accounts:
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Depository accounts
Depository accounts used to deposit and withdraw cash, such as:
Account statement covering a
one-month period
or a direct account verification (i.e., verification of deposit (VOD))
Account statement(s) covering a
two-month period
or a direct account verification (i.e., VOD)
Individual Development Account (IDA) – Agency matching funds not subject to Recapture
With respect to the subject Mortgage, the Agency must not:
Be the Seller or have participated in any aspect of the Mortgage origination process
Be affiliated with, under contract to or financed (directly or indirectly) by the Seller or any party that participated in the Mortgage origination process.
For these purposes, “affiliated with” means that the Agency and the Seller or other party are related to each other as a consequence of one entity directly or indirectly controlling the other party, being controlled by the other party or being under common control with that party.
Any matching funds may be considered Borrower personal funds
A maximum of a 4-to-1 match by an Agency’s funds is permitted
The Borrower must satisfy any vesting requirements of the matching IDA program
Section 5501.4(b)
for information related to IDA – Agency matching funds subject to Recapture.
Documentation of the IDA program verifying:
Matching funds are not subject to Recapture
Ratio of matching funds by the Agency
Regular payments made to the IDA by the Borrower and the matching organization
Vested balance or the percentage of vesting
Community Savings System accounts – Borrower contributions
Funds on deposit in a Community Savings System that are deposited by the Borrower.
A nonprofit community organization must administer the savings system.
Community Savings Systems account statements or a direct account verification identifying the nonprofit community organization as the administrator and showing all Borrower contributions.
Pooled funds
Pooled funds are funds on deposit provided by the Borrower and other member(s) of a group of Related Persons who:
Have resided together for at least one year
Will continue residing together in the new residence, and are “pooling” their funds to buy a home
Funds provided by Related Persons who do not reside with the Borrower are subject to the requirements of the table in
Section 5501.4
for gift funds.
All of the following:
Evidence that the Borrower and the Related Person have resided together for at least one year
Documentation verifying the pooled funds per the requirements for the applicable asset type in Sections 5501.3 and
5501.4
A written statement, in the form of a signed letter or an e-mail directly from the Borrower, executed at application attesting to all of the following:
The source of the pooled funds
The fact that the pooled funds were not borrowed by the contributing Related Person
The relationship between the contributing Related Person and the Borrower
That the Related Person has resided with the Borrower for the past year and intends to continue residing with the Borrower in the new residence for the foreseeable future
Note: The written statement is not required to be notarized or acknowledged but must be kept in the Mortgage file.
(b)
Securities, retirement accounts and government bonds
The following table contains eligibility and documentation requirements for securities, retirement accounts and government bonds:
Securities, retirement accounts and government bonds
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Securities
Securities that are traded on an exchange or marketplace, generally available to the public such as:
Other securities
Value must not include margin accounts.
Stock with limitations on its accessibility (e.g., restricted stock that has not vested and been distributed to the recipient) is not eligible.
Account statement covering a
one-month period
or a direct account verification (i.e., VOD)
Account statement(s) covering a
two-month period
or a direct account verification (i.e., VOD)
If the Borrower does not receive a stock/security account statement:
Provide evidence the security is owned by the Borrower, and
Document value using current stock prices from a financial publication or website
When securities are needed for closing,
evidence of liquidation is required
unless the combined value of the assets is at least 20% greater than the amount from these assets needed for closing.
Retirement accounts
Independent retirement accounts and Internal Revenue Service (IRS)-qualified employer retirement plan accounts such as:
401(k)
403(b)
Individual Retirement Accounts (IRAs) (traditional and Roth)
Simplified Employee Pension (SEP)-IRA
Savings Incentive Match PLan for Employees (SIMPLE) IRA
State retirement savings plans
Other independent and IRS-qualified employer retirement plan accounts
Account statement covering a
one-month period
or a direct account verification (i.e., VOD)
Account statement(s) covering a
two-month period
or a direct account verification (i.e., VOD)
When retirement accounts are needed for closing,
evidence of liquidation is required
unless the combined value of the assets is at least 20% greater than the amount from these assets needed for closing.
When
evidence of liquidation is not required
, in order to use the vested amount of an IRS-qualified employer retirement account, the Mortgage file must include documentation confirming:
The Borrower is permitted to make withdrawals, and
Severance from the Borrower’s current employment is not required
Government bonds (federal, State or municipal)
The value used must be based on the lower of the purchase price or current redeemable value.
Documentation verifying the ownership and the value.
When government bonds are needed for closing,
evidence of liquidation is required
unless the combined value of the assets is at least 20% greater than the amount from these assets needed for closing.
(c)
Proceeds from a secured loan
The following table contains eligibility and documentation requirements for proceeds from a secured loan:
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Standard Documentation requirements
Proceeds from a loan fully secured by the Borrower’s assets other than real property
The loan must not be provided by an interested party to the real estate or Mortgage transaction.
When the loan is secured by a financial asset used to qualify the Borrower for the Mortgage transaction, the value of the asset must be reduced by the amount of the loan proceeds and any associated fees.
Section 5401.2(c)(vii)
for when the monthly payment on a loan secured by the Borrower’s financial asset may be excluded from the monthly debt payment-to-income (DTI) ratio.
All of the following:
Documentation verifying the value and ownership of the asset and which supports that the loan is secured by that asset
Evidence of receipt of the loan proceeds
Proceeds from a loan secured by the Borrower’s real property (including proceeds from a Home Equity Line of Credit (HELOC) or a bridge loan)
For refinance Mortgages, the cash-out proceeds from the subject cash-out refinance transaction and any cash back received on the subject “no cash-out” refinance transaction are not eligible sources of funds for reserves.
All of the following:
Evidence the loan is secured by the Borrower’s real property
Evidence of the Borrower’s receipt of the disbursed loan proceeds
(d)
Revolving credit card (charges/cash advances) or unsecured line of credit
The following table contains eligibility and documentation requirements for using a revolving credit card (charges/cash advances) or unsecured line of credit:
Revolving credit card (charges/cash advances) or unsecured line of credit
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Standard Documentation requirements
Borrower’s revolving credit card (charges/cash advances) or unsecured line of credit
Borrower’s revolving credit card (charges/cash advances) or unsecured line of credit may only be used to pay fees associated with the Mortgage application process (e.g., origination fees, commitment fees, lock-in fees, appraisal, credit report and flood certifications). The
maximum amount charged or advanced
may not exceed the greater of 2% of the Mortgage amount or $1,500.
Additionally, one of the following requirements must be met:
The Borrower must have sufficient verified funds to pay these fees (in addition to the funds needed to qualify for the Mortgage transaction); however, the Borrower is not required to pay off these charges at closing
The amount charged or advanced must be included in the Borrower’s total outstanding debt and the repayment of such amount must be included when determining the Borrower’s monthly DTI ratio as described in
Section 4408.1(d)
when the Borrower uses a revolving credit card or unsecured line of credit to pay fees that will be reimbursed pursuant to an employee relocation program.
All of the following:
The account statement or receipt showing the amount charged or advanced
Verification of sufficient funds to pay the amount charged or advanced if the amount charged or advanced is not included in the monthly DTI ratio
(e)
Proceeds from credit card reward points
The following table contains eligibility and documentation requirements for proceeds from credit card reward points:
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Credit card reward points
The reward points must be redeemed for cash.
All of the following for reward points that are not yet deposited in the Borrower’s account:
Evidence of the Borrower’s ownership of the reward points and their cash value, and
Evidence that the reward points are redeemed for cash prior to closing, which may include a direct transfer of the cash to the settlement or closing agent
For reward points redeemed for cash and deposited in the Borrower’s account, refer to the requirements for evaluation of deposits in the Borrower’s accounts in
(f)
Proceeds from the sale of real estate and other assets
The following table contains eligibility and documentation requirements for proceeds from the sale of real estate and other assets:
Proceeds from the sale of real estate and other assets
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Standard Documentation requirements
Proceeds from the sale of the Borrower’s real property (including proceeds from a 1031 exchange)
The Settlement/Closing Disclosure Statement or an alternative form required by law verifying the proceeds from the sale of the Borrower’s real property, and/or
An executed buy-out agreement that is part of an employer relocation plan that takes responsibility for the outstanding Mortgage(s)
Trade equity: Net proceeds of the trade-in of the Borrower’s previously owned residence
The Borrower’s equity in the previously owned residence is determined by subtracting any outstanding liens on the previously owned residence, plus any transfer costs, from the lesser of the appraised value of the previously owned residence or its trade-in price as shown in the trade-in contract.
All of the following:
The appraisal of the Borrower’s previously owned residence
The trade-in contract
Proceeds from the sale of the Borrower’s assets other than real property or exchange-traded securities
The purchaser of the Borrower’s asset must not be an interested party to the real estate or Mortgage transaction.
All of the following:
A signed bill of sale documenting the asset and transfer of ownership
(g)
Real estate commission and rent credits
The following table contains eligibility and documentation requirements for real estate commission and rent credits:
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Borrower’s real estate commission
Borrower’s real estate commission is an eligible source of funds for Down Payment and/or Closing Costs when the Borrower is a licensed real estate agent that is due to receive a sales commission from their purchase of the subject property.
The Settlement/Closing Disclosure Statement, which must reflect the commission earned by the Borrower and credited toward the Mortgage transaction.
Rent credits
The portion of rental payments paid by the Borrower credited towards the Down Payment and/or Closing Costs under a documented rental/purchase agreement. The credit must not exceed the difference between the market rent and actual rent paid.
The rental/purchase agreement must have an original term of at least 12 months and the rent must be based on a minimum of 12 months rental payments.
All of the following:
Section 5202.1(b)
for acceptable documentation for rental verification)
Appraiser’s determination of the market rent for the subject property
(h)
Funds from a trust
The following table contains eligibility and documentation requirements for funds from a trust:
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Funds from a trust
The Borrower must be the beneficiary of the trust and have access to the funds as of the Note Date.
The Borrower’s portion of undistributed trust funds may be used as
reserves
only.
The trust agreement or a signed statement from the trustee or trust manager that documents the following information:
Identifies the Borrower as the beneficiary
Confirms that the Borrower has access to all or a certain specific amount of the funds
Confirms that the trust has sufficient assets to disburse funds needed by the Borrower
When trust funds are needed for closing, evidence of receipt of the disbursed funds from the trust is required.
(i)
Cash value of a life insurance policy
The following table contains eligibility and documentation requirements for cash value of a life insurance policy:
Asset type and eligibility requirements
Streamlined Accept Documentation requirements
Standard Documentation requirements
Cash value of a life insurance policy (not the face value)
The Borrower must be the owner of the policy and not the beneficiary.
Documentation from the life insurance company verifying the following information:
Policy owner(s)
Period covered and current cash value, and
Any outstanding loans
When cash value of the life insurance policy is needed for closing, evidence of liquidation is required.
(j)
Additional requirements for accounts held in financial institutions
All accounts held in financial institutions must be owned by the Borrower and the Borrower must have access to the funds.
Funds in accounts that are owned jointly by the Borrower and a non-Borrower are considered Borrower personal funds
Accounts held in the name of a Living Trust are considered to be owned by the Borrower when the Borrower is the Settlor of the Living Trust
When the Borrower is a Living Trust, the Underwritten Settlor is considered to be the owner of accounts held in the name of the trust
(k)
Minimum contribution from Borrower personal funds
For a purchase transaction Mortgage, the Borrower must make a minimum contribution from Borrower personal funds when required in the Guide, as described in the table below:
Minimum contribution from Borrower personal funds
Guide section
Mortgages with loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios ≤ 80%
Mortgages with LTV/TLTV/HTLTV ratios > 80%
Mortgage secured by a 1- to 4-unit Primary Residence
None
5% of value, when gift funds are used for the transaction
Mortgage secured by an Investment Property
Section 4201.13
All funds used for the transaction must be Borrower personal funds
Section 4204.4
5% of value (must be Owner-Occupant’s personal funds)
Section 4501.7(a)(iii)
for requirements for minimum contribution from Borrower personal funds for Home Possible
®
Section 4504.7(a)
for requirements for minimum contribution from Borrower personal funds for HeritageOne
®
Mortgages.
(l)
Earnest money deposit (EMD)
When an EMD for a purchase transaction Mortgage is used to qualify the Borrower, the Seller must document that the EMD cleared the Borrower’s account (e.g., copy of the canceled check, asset account statement, written statement from the EMD holder verifying receipt of the funds or wire transfer confirmation).
When the EMD is needed to meet the minimum contribution from Borrower personal funds, the Seller must:
Verify that the source of the EMD is an eligible asset type and document it in accordance with the applicable requirements in this section
Provide account statement(s) (based on Streamlined Accept or Standard documentation requirements, as applicable) or a direct account verification (i.e., verification of deposit (VOD)) that covers the period up to and including the date the EMD funds cleared the account
The EMD must not be counted twice in the evaluation of the Mortgage (i.e., deducted from the funds to close and counted in assets).
If the source of the Borrower’s EMD is gift funds, see
Section 5501.4(a)(1)
.
(m)
Business assets
Funds from a Borrower’s business account may be used to qualify the Borrower, provided they meet the requirements of this chapter, except as stated below.
Documentation of large deposits, as described in
Section 5501.1(f)
, is not required provided that the Seller:
Reviews a minimum of the most recent two months of the business account statements, and
Determines the deposits are typical for the Borrower’s business
Section 5304.1(l)
for additional requirements when self-employed income from the business is used for qualifying.
(n)
Source of funds from outside the United States and its territories
When the source of funds needed for closing is, or otherwise originates from, asset(s) located outside the United States and its territories:
Funds must be transferred into a U.S.- or State-regulated financial institution and verified in U.S. dollars prior to the closing of the Mortgage transaction, or
Combined value of the assets must be at least 20% greater than the amount from these assets needed for closing
Section 5102.3(b)
for additional requirements when funds from outside the United States and its territories are used to qualify the Borrower.
(o)
Cryptocurrency
Any amount of cryptocurrency must be exchanged for U.S. dollars if it will be used as a source of funds for the Mortgage transaction (i.e., any funds required to be paid by the Borrower and Borrower reserves).
